The rising fears of a global slowdown spooked markets with Dow falling nearly 650 points overnight. Asia too traded lower. The slump in Apple stock indicated that the Chinese and US economies were taking a hit owing to the trade tensions.
In an interview with CNBC-TV18, Mark Matthews of Bank Julius Baer and Adrian Mowat, emerging equity markets strategist shared their views and outlook.
“I find the move in the market surprising because the data does not suggest a recession this year. Economists cannot predict very far into the future but we are expecting some kind of a mild recession in 2020 but I think it is too early for the market to panic about that at this stage. I think what the market is simply reacting to is the fact that there is some deceleration in growth and that is entirely normal because just taking the ISM purchasing manager’s index (PMI) which you were referring to earlier, going from 59.3 to 54.1, yes it seems like a very big drop, it is a big drop but it is extremely rare that the you get the PMI at 59.3 for a long period of time. That was not something that was sustainable and we should have known it wasn’t sustainable and 54.1 is still a very healthy number for the PMI anything above 50 signals expansion. I don’t think that the US economy is weak,” Matthews said.
Speaking about India, he added, “All I will say is that, it is difficult for the emerging markets (EMs) including India to rise when the US is going down. The US is going down right now ... within India, I see positives and negatives. The largest positive clearly - the collapse in the oil price will take a lot of pressure off inflation and the central bank. On the opposite side, we have the election coming up. So it balances out to me.”
“I think the case for EMs is pretty strong for 2019. You are beginning to see some dollar weakness which is part of the story with regards to Fed expectations. The dollar was pricing in a number of increases in 2019 and it is in the process of removing those increases which probably does mean that the dollar has peaked and might weaken throughout 2019. That certainly will take the pressure off EMs,” said Mowat.